Detroit casinos beat city expectations for initial reopening
Even as revenue at Detroit's three casinos fell 42% year-over-year in August, taxes on wagers beat city expectations for their initial reopening with limited capacity following a four-and-a-half-month shutdown due to the COVID-19 pandemic.
The casinos reported $69.2 million in revenue for last month while operating at 15% capacity, according to the Michigan Gaming Control Board. The casinos are a major source of income for the city of Detroit through wagering and income tax collections, so the drop-off in casino revenue exacerbated concerns over other deep coronavirus-related revenue losses the city expects to total $410 million during the 16 months since the pandemic began.
The Detroit casinos reported submitting $8.3 million in wagering taxes and development agreement payments to the city of Detroit during August. That's about half of the typical tax revenues, but more than double the $3 million per month the city had forecast for the initial reopening.
"We are cautiously optimistic," David Massaron, the city's chief financial officer, said Monday. "We are trending ahead of where we are in terms of the monthly forecast, but we don't know what that portends for the year as a whole. We don't know if that is pent-up demand, or if it is the beginning of the upward ramp-up."
In planning its budget, the city projects the casinos will return to about 95% of business by early next year, Massaron said, though they are unlikely to hit the $400 million revenue benchmark that subjects them to a higher tax rate.
The city forecasts the tax revenues from casinos will come in at about $135 million for the fiscal year — a 25% decline from the $184 million for the 2019-20 fiscal year that ended after June and included part of the shutdown.
MGM Grand Detroit, which opened Aug. 7, reported $28.6 million in revenue for the month, down 46%. The other two opened Aug. 5. MotorCity Casino Hotel's revenue fell 37.5% to $25 million, while Greektown Casino-Hotel's dropped 41.5% to $15.7 million. In total, they are down 62% year-to-date.
The casinos also paid $5.6 million in taxes to the state of Michigan for August compared with $9.7 million for the same month last year.
MGM Grand did not immediately have comment on how it plans to keep up the momentum from the reopening. Last month, it laid off 1,100 people because of the business impact of capacity limitations, though the workers will remain on a recall list.
MotorCity declined to comment, but an email sent to customers last week indicated it planned to open its poker room this week. The state control board, however, says such plans require board approval.
Greektown owner Penn National Gaming Inc. typically does not comment on individual property performance or marketing strategies, but it hopes to open its poker room in a limited capacity in the coming weeks, Jeff Morris, vice president of public affairs, said in an email. The company last week notified the state of 43 permanent layoffs because of COVID-19.
"The casinos make the vast majority of their money on people who have reasons to be congregating downtown," said Alex Calderone, managing director of Birmingham-based Calderone Advisory Group and a gaming industry observer. "They're going to Tigers games, different concerts and things of that nature. None of that was going on, so while 42% year-over-year is still significant (in decline), it's perhaps not as bad a worst-case scenario might have been."
What might represent an even greater outlook for the casinos as well as the city amid the pandemic is the legalization of online gaming, Calderone added.The gaming control board hopes internet casino gaming and sports betting can begin by late fall, spokeswoman Mary Kay Bean said in an email.
A public hearing on the proposed rule is set for Sept. 23, though it must go through several other agencies and receive approval from a joint committee in the Michigan legislature. The control board also must approve at least on tribal and one commercial license before launch.
The recently legalized sports betting did not represent a significant portion of casino revenues, as COVID-19 has delayed college football and other leagues. Qualified adjusted gross receipts for the month were $1.97 million, contributing $74,733 in retail sports betting taxes to the state and $91,340 to the city.
MGM reported $932,601 in gross receipts from sports betting for August, MotorCity's was $493,275, and Greektown's was $551,176, which represent nearly all sports betting revenues since the casinos could begin offering it in early March.
Fantasy contest operators reported total adjusted July revenues of $881,204 and paid taxes of $74,021 to the state of Michigan. Through the end of July, they have reported $4.9 million in aggregate adjusted revenues.